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Fuel Crisis

27 December 2017

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FUEL SCARCITY: Fixing the Oil Sector is not Rocket Science!

* Labour and the working masses should demand immediate repair of old refineries and building of new ones

* Fight for nationalization of the oil industry under democratic control and management

H.T Soweto

Once again, Nigeria is in the throes of fuel scarcity. This fuel crisis is turning to be a big problem for the Buhari/Osinbajo All Progressive Congress (APC) government as it is seriously robbing it of whatever credibility it has left. Now many people are beginning to call the regime "clueless" and "incompetent" – the very same adjectives used to describe the Jonathan PDP regime some two and half years back.

To start with, the Democratic Socialist Movement (DSM) joins the working masses to condemn this scarcity which has been caused by the failed neo-liberal policies of the Buhari/Osinbajo government and the agenda of oil marketers to force an increase in fuel price.

We call on the Nigeria Labour Congress (NLC), the Trade Union Congress (TUC) and the United Labour Congress (ULC) to urgently convene a meeting of their organs to discuss how the labour movement should respond to this crisis. This should include actions to force government to ensure adequate supply of petroleum products. In essence, labour and the working masses should demand immediate repair of old refineries and building of new ones. It is very crucial for the labour movement to begin to prepare and mobilize for a 24 hour general strike by organizing mass rallies across the federation to send a clear warning to the ruling class against any attempt to increase fuel price and demand no privatisation plus the nationalization of the private oil and gas industry under genuine public democratic control and management to combat corruption and looting. Otherwise the working masses would be caught unprepared by the time the real agenda to fully deregulate the sector and increase fuel price is unveiled.

We must make the point here that the assurances of the Buhari/Osinbajo capitalist government that there is no plan to hike fuel price should be taken with a pinch of salt. With the 2019 general elections in mind, the government could hold on to another hike in pump price in the immediate period but in the long run it has no other option than to give in to the desire of the private sector for full deregulation. This is the same government that is planning to hike electricity tariff in the new year on behalf of the private owners of the electricity distribution companies, the second time in two years it would do this and in contravention of a court injunction. Therefore, anyone who believes that such a government has no plan to hike fuel price is living in a fool's paradise.

Old Wine in New Bottle

Now queues are back at filling stations as many are unable to pay the customary visit to loved ones during the yuletide season because of rising cost of transportation. Temper is flaring across the country. Even the most inveterate supporters of the regime are beginning to question its credibility.

This is not the first time there would be fuel scarcity during the Christmas season. There were many also under previous PDP regimes. On this score, the ruling APC is absolutely right. But where the party, shameless in its buck-passing, is dead wrong is that 15 million voters cast their lot with Buhari because they wanted a government that would rid Nigeria of all of the inadequacies and failures of the past PDP regimes and not one that would put the country back into the same quagmire.

Now many are asking, why has Buhari in whom they placed so much hope failed to deliver on all fronts? The answer is quite simple. To resolve any of the socio-economic crises facing the working and poor people in Nigeria requires measures to end capitalism starting with its anti-poor policies of privatization of public utilities, commercialization of education and health and deregulation of the oil industry etc.

In other words, you cannot resolve Nigeria's problems on a firm and sustainable basis without transforming capitalism and implementing socialist economic measures. Without this, any attempted reforms will succumb to the internal contradictions of the capitalist system and crumble. This is the lesson that the unraveling of the Buhari/Osinbajo's "change" project demonstrates.

Over the past two years, the Buhari government has tried to reform the economy by staying within the confines of capitalism. This has led to a situation whereby the government has gone further than several capitalist regimes in the past in its acceleration of parts of the neo-liberal agenda. For instance, the Buhari regime expedited actions on the neo-liberal Petroleum Industry Bill (PIB) which when passed would further consolidate the private ownership and profit-first interest of the oil and gas industry. The regime has also partially deregulated the oil industry by removing subsidy on petroleum products in May last year – something which the hated Jonathan PDP regime was unable to achieve.

It is striking that one of the first actions of the Buhari/Osinbajo regime after inauguration was to pay oil marketers millions of dollars which they were demanding from the Jonathan government back then in March 2015 as the exchange rate differentials of the subsidy for the petroleum products they imported. Instead of taking firm actions against oil marketers and subsidy thieves, the so-called oil cabals, the regime largely pampered them.

On refineries, the regime has not taken any significant step to build new refineries while the old ones continue to rot. Rather it has relinquished this responsibility to Africa's billionaire, Aliko Dangote, who is in the process of completing the building of an $11billion refinery and petrochemical plant in Lagos state free trade zone scheduled to take off in the year 2019. At 650, 000 barrel per day crude oil processing capacity, this refinery will be the largest in Africa and the single largest in the world. The refinery would have 1.5 times the capacity of the existing 4 refineries even if they are working at 100 per cent capacity while its petrochemical arm is 13 times larger than the Eleme Petrochemical built by government.

But when and if this refinery comes on-stream, far from bringing any relief, it would mark the beginning of another cycle of unaffordable prices of petroleum products. As officials of Aliko Dangote's company have made clear, they are not building the refinery to help Nigeria solve its problems, they are doing so to make profit. According to Mr. Mansur Ahmed, the Executive Director Stakeholder Management and Corporate Communication, Dangote Group, the company went into oil refining on the expectation that it would not be affected by decision of local pricing. "We expect that we will buy our input, especially crude, for international market price, and that when we produce products, we will sell those products at international prices." (Punch, 30 March 2016). Consequently in the near future, one man (or a one-man cabal so to speak), armed with an unchallenged monopoly, would have powers to decide whether the nation gets petroleum products and at what price! This is the tragic consequence of the capitalist economic agenda of the government.

Price Modulation

The allegation by the ruling party and the government that the scarcity is due to sabotage by oil marketers trying to push for an increase in fuel price cannot be taken lightly. But what the regime is dishonest to admit is that it was the one that armed the oil marketers with the means to arm-twist the nation through its disastrous policy of price modulation/partial deregulation. This policy which was enacted in May 2016 cancelled subsidy and raised the price of petrol from N86.50k to N145 at a period when factors actually supported a reduction in prices.

Price modulation means that prices of fuel products would reflect the movement in the market. At the time it was introduced, the real movement of fuel price was downward because of the low landing cost. Crude oil price was below $40 at the time. Therefore the N145 price hike was a gift to the oil marketers to help them recoup losses they would incur because of the volatile foreign exchange.

At the time, the government expected that at a ceiling of N145 per litre, prices would crash down with competition. Actually the Minister of State for Petroleum resources, Ibe Kachikwu openly claimed that in a post-subsidy scenario, competition would bring down pump price within 6 months. To make good on this false boast, a few weeks after the hike in pump price, the social media was filled with news of some petrol stations selling at N141 and N142 per litre below the official price. In effect, propaganda was unleashed by the Buhari government to support their economic gamble in order to undermine the general strike called by the labour movement at the time against the hike. But as an African adage goes, a lie can travel for 20 years, but truth only needs one day to catch up with it.

Now the sugar-coated post-subsidy scenario of competition driving down prices has collapsed. This is not actually surprising, at least to Socialists. In actuality, this policy and the way it has panned out against the expectations of the government reveals the insoluble internal contradictions of Nigeria's neo-colonial capitalist economy and its dependence on the world market. For instance, because of the lack of local refinery capacity, price modulation means that the pump price of fuel will reflect not simply the factors of demand and supply here in Nigeria but also the movement in the prices of crude oil on the world market. This we explained in May last year.

Now as the price of crude oil has risen on the world market, so also has the cost of importing petroleum products increased. The price of crude oil on the world market is now around $64 per barrel. This together with the high exchange rate has led to a rise in the landing cost to between N154 and N155 per litre. On the basis of the price modulation mechanism, this means pump price ought to go up to at least N166 to N167 naira per litre for the oil marketers to make a profit. One of the marketers put it bluntly thus: "before private importers can resume importation, the exchange rate to a dollar must be N250 and we can sell at the price of N145 per litre" (Punch, 24 December 2017).

The alternative is for subsidy to be restored – something which actually had been restored through the back door for months now without the government making a noise about it. Actually for several months, the NNPC has been importing at least 95 percent of the country's daily requirement for petroleum products in contravention of the price modulation mechanism/partial deregulation agenda. But even this has not been able to prevent the current crisis.

No way out on the basis of capitalism

The central issue in the on-going fuel scarcity as with previous ones is that the people of Nigeria do not have any control over their oil resources and consequently, the wealth that accrues from it. The oil and gas industry (upstream and downstream) remain under the grip of private profit-first interests i.e. International Oil Companies (IOCs), local oil tycoons and oil block owners, oil importers and marketers, ship owners and storage facility owners etc. So long this remains the case, fuel scarcity and unaffordable prices of petroleum products will continue to be the lot of the working people. Therefore even if the current scarcity subsides, it would only mean a brief relief before another bout of scarcity and hiked prices.

In reality, all Nigeria gets through the NNPC are signature bonuses, royalties and taxes. The loss of N7.6 trillion in revenue in two years and the Malabu $1.1 billion scandal are just examples of the enormous swindle going on in the industry. Supplementing this is the near collapse of the country's four refineries which makes the country to be heavily dependent on imported fuel and consequently on oil marketers.

In essence, the entirety of the oil and gas industry (upstream and downstream) is under the control of a profit-first cabal who have been strengthened by the policies of the Buhari regime. When Dangote's refinery is completed, the power of this tiny cabal to determine the fate of the country would be further enhanced. In fact, in the downstream sector, Dangote would have a power that no individual has ever wielded in the country – which is to determine how much Nigerians can buy fuel. Therefore, the current crisis is a child's play compared to the one that would be unleashed as the neo-liberal agenda is further consolidated.

The reality is that there is no way out of the problem under capitalism. Especially in the event of Nigeria relapsing into recession, renewed militancy in the Niger Delta region or another world economic crisis, the oil and gas industry can be thrown into further crisis. The abject failure of the Buhari/Osinbajo government in the oil industry graphically illustrates how futile is any project to reform capitalism in the age of imperialism in order to make it play a progressive role. This is why an alternative to the neo-liberal consensus of the capitalist APC and PDP is urgently needed now.

A Socialist Programme

To fight the cabal and break its grip, Socialists canvass for the nationalization of the oil and gas industry under public democratic control and management. This means that the assets of the International Oil Companies (IOCs), the oil blocks and the local oil industries must be placed under public ownership with compensation paid to their former owners on the basis of proven need. The NNPC should be made a public institution run by a board made up of democratically elected representatives of the workers and management. By this measure, the country will be placed in a position to be able to explore, produce and sell its crude oil on its terms and with all the benefits accruing into the public purse.

Secondly, we canvass for a programme to rapidly repair the old refineries and build new ones in order to end fuel importation and allow for a more thorough utilization of the potentials of Nigeria's oil and gas resource. Not private refineries like Dangote's but public refineries that would be placed under workers democratic management and that would be able to ensure that Nigerians have access to affordable petroleum and petrochemical products.

The above measures if linked with a workers and poor people's government implementing a socialist plan of the entire economy can provide a basis to begin to rebuild the country, provide free public education and health care, revive workers' living standards and provide jobs for all. It would be an example for working people in other countries to follow. Only the Socialist Party of Nigeria (SPN) - a party formed by the Democratic Socialist Movement (DSM) and its supporters - stands for this programme in opposition to the neo-liberal consensus of the ruling APC and the PDP. We urge workers, youth and the poor masses who are angry at the fuel scarcity and are seeking a way out of the quagmire to join both the Democratic Socialist Movement (DSM) and the Socialist Party of Nigeria (SPN) so that together we can fight for an alternative to the capitalist crisis.